SEC Commissioner Hester M. Peirce urged the agency to conduct an in-depth analysis of the features and risks of exchange-traded funds ("ETFs") as the SEC works toward adopting a final rule intended to reduce the time to market for ETFs.
In an address before the FSB/IOSCO Joint Workshop on ETFs and Market Liquidity, Ms. Peirce urged regulators to analyze how ETFs and relevant markets function in order to understand the risks of these products. In particular, she advised regulators to consider the diversity of types of ETFs and the ways in which they operate. Ms. Peirce emphasized that certain ETFs may not be suitable for all investors, and that disclosures should reflect this fact.
Additionally, Ms. Peirce called for feedback from market participants on how problems related to ETFs could have adverse effects on the broader financial system. Ms. Peirce noted that while ETFs have been very liquid historically and functioned effectively, it is nevertheless important to consider mechanisms by which problems with ETFs could disrupt financial markets and how plausible such a scenario is.
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